Former FrontPoint Partners hedge fund manager Joseph Skowron was ordered to return the money he earned at the firm during his years of insider-trading.

A federal judge in New York yesterday ruled that Skowron was a "faithless servant" and must return $31 million he earned between April 2007 and November 2010 to Morgan Stanley, which owned FrontPoint. Last year, he was ordered to pay the bank $10.2 million, on top of $38.2 million in disgorgement and fines at his sentencing.

After the ruling, Morgan Stanley dropped its bid for punitive damages from Skowron, who is serving a five-year prison sentence.

Skowron, who was FrontPoint's top healthcare manager, pleaded guilty two years ago to trading on confidential information about a drug trial, allowing FrontPoint to avoid $30 million in losses. The scandal contributed to massive redemptions at the hedge fund and eventually to its closure.

"Insider trading is the ultimate abuse of a portfolio manager's position and privileges because it goes to the heart of his primary areas of responsibility," U.S. District Judge Shira Scheindlin wrote. "In addition to exposing Morgan Stanley to government investigations and direct financial losses, Skowron's behavior damaged the firm's reputation, a valuable corporate asset."

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